Blockchain works as the fundamental technology for most cryptocurrencies. At present, businesses are taking advantage of blockchain technology to manage distributed databases, perform digital transactions, and manage healthcare. They are utilizing this technology to create applications that their customers can use. The use of blockchain technology has the benefit of providing safety in transactions thanks to its cryptographic regulations, lack of central authority and agreement. Yet, blockchain is sensitive to cyberattacks. In June of 2022, Halborn brought to light a major vulnerability that had an effect on a lot of the highest-ranking cryptocurrency storage units, with MetaMask being one of them.
So how can we keep blockchain applications safe? This piece gives an overview of the security system for blockchain applications.
What Is a Blockchain?
A blockchain is a collection of data that is dispersed among a network of computers, functioning as a shared database or ledger. A blockchain functions as a database, storing data electronically in a digital form. Blockchains are mainly noted for their significant role in keeping secure and decentralized financial records in digital money systems, such as Bitcoin. Blockchain technology provides a reliable and secure way to keep records that can be trusted without needing to rely on a third party. Its innovation is that it creates a trust between different parties without having to involve anyone else.
A major variation between a standard database and a blockchain is the way the information is structured. A blockchain assembles data in blocks that contain multiple pieces of information. Blocks are capable of storing certain amounts of information, and when they are filled, the chain–which contains all connected blocks of the stored data–is shut off and linked to the prior filled block, resulting in the blockchain. Every piece of data that comes after the most recent section is included in a fresh block that will be connected to the chain when it is completely filled.
A database organizes its information into tables, while blockchain structures its data into chunks (blocks) connected together, as its name suggests. When this data structure is used in a non-centralized way, it creates an immutable timeline of information. Once a block is completed, it is fixed and has its place in history. A precise timestamp is assigned to each block when it is included in the chain.
How Does a Blockchain Work?
The aim of blockchain is to provide an environment for digital data to be stored and shared without being altered. In this manner, a blockchain acts as the basis for inalterable ledgers that keep track of deals that cannot be altered, removed, or ruined. This is why blockchains are also referred to as a form of distributed ledger technology (DLT).
The idea for blockchain was brought up in 1991, however it was not used until 2009 when it powered the cryptocurrency Bitcoin. Over the last several years, the prevalence of blockchain technology has increased dramatically due to the emergence of numerous digital currencies, DeFi functions, NFTs, and smart agreements.
How Are Blockchains Used?
We now have an understanding that the blocks in Bitcoin’s blockchain save information regarding money exchanges. At present, there are over 10,000 alternative types of cryptocurrency based on blockchain technology. It turns out that blockchain is actually a trustworthy source to document information regarding various other sorts of transactions.
Banking and Finance
It is likely that banking would take advantage of the most gains from integrating blockchain technology into its business activities. Money-lending organizations are only open during typical working hours, usually from Monday to Friday. If you make an attempt to put in a check on Friday evening, it’s likely that you won’t be able to observe the funds in your account until early Monday morning. Even if you put your payment in the bank when it’s open, it can still take between one and three days to be approved as a result of the sheer number of operations the banks have to settle. Blockchain, on the other hand, never sleeps.
Currency
Blockchain forms the bedrock for cryptocurrencies like Bitcoin. The U.S. dollar is controlled by the Federal Reserve. The user’s data and money are entirely at the mercy of the central governing body such as the bank or government. If a customer’s bank has been compromised, their confidential data is in jeopardy. In the event that the client’s banking institution encounters bankruptcy or if the client lives in a nation with an unstable governing body, there is a likelihood that the value of their money could be in danger. In 2008, some failing banks were proped up with public funds and contributions from taxpayers. These are the issues that initiated the creation and advancement of Bitcoin.
Healthcare
Healthcare providers can utilize blockchain technology to safely keep their clients’ health histories. Once a medical record has been created and validated, it can be stored on the blockchain, giving patients the assurance that their information cannot be altered. These personal health records could be encoded and saved securely on the blockchain with a personal login and password, allowing only authorized persons to access the information, and ensuring confidentiality.
Property Records
If you have been to the Registrar’s Office in your area, you can attest to the fact that filing property rights is a taxing and slow process. A physical document must be presented to an official of the government at the vital records office, where it is manually included in the county’s main database and open-access record. Establishing ownership of a property must be clarified with the reference of the public index in the event of a disagreement.
Smart Contracts
A smart contract is a computer program stored on the blockchain network that is programmed to enforce the terms of a specific agreement between two or more parties. It can be used to verify and mediate the negotiations and performance of a contractual agreement. Agreements between users are enforced through a set of predetermined conditions that are carried out by smart contracts. Once the eligibility requirements are fulfilled, the agreement is immediately executed.
Supply Chains
Suppliers can utilize blockchain technology to index materials they have acquired from their sources using the IBM Food Trust illustration as an example. This would enable businesses to check the accuracy of not merely their wares but also well-known tags such as “Organic,” “Local,” and “Fair Trade.”
Voting
Blockchain technology would make it almost unfeasible to alter votes. The blockchain system would ensure transparency in the voting process, requiring less workforce to carry out an election and offering officials with quick results. This would make recounts unnecessary and prevent the possibility of electoral corruption.
Can Blockchain be Hacked?
Until recently, certain individuals in the blockchain industry thought that the technology was “unbreakable” – yet several assaults have displayed that this is not accurate. An increasing number of vulnerabilities in blockchain applications and smart contract platforms are appearing. In 2016, Bitfinex, one of the larger crypto exchanges, experienced the loss of $72 million from their account due to a breach in security that resulted from stolen keys.
Essentially, don’t pay attention to people who claim that something’s “unhackable” -just because something is on a blockchain, that doesn’t make it any more secure than any other type of storage.
Is Blockchain Secure?
Blockchain technology provides decentralized protection and assurance through multiple mechanisms. At the outset, every additional block is added in an ordered, sequential fashion. They always get appended to the last part of the blockchain. Once a block has been added to the end of the blockchain, it is highly doubtful that its content will be changed unless the majority of the network agrees to do so. That is because each block carries its own hash plus the hash from the previous block, in addition to the already mentioned time stamp. A mathematical function is used to generate a hash code, which is a sequence of numbers and letters created from digital data. If any alterations are made to the data, the corresponding hash value will also be altered.
Let’s assume that a person, who operates a network node on a blockchain, wants to corrupt the blockchain and pilfer cryptocurrency from the other participants. If they changed their own individual version, it would no longer match up with everyone else’s version. When everyone compared their records, it would be evident that there was one that was different and this chain of data from the hacker would be considered to be invalid.
Accomplishing this type of manipulation would necessitate that the hacker handle and change 51% or higher of the versions of the blockchain so that their brand-new copy turns into the major copy and is thus established as the valid chain. Such an assault would need an exorbitant amount of funds and assets, as they should re-do all of the blocks seeing as they would currently have distinct timestamps and hash codes.
The immense sizes and rapid expansion of many cryptocurrency networks make a successful attack almost impossible due to the expense it would require. This would be not only incredibly costly but probably futile. Changes made to the blockchain would be noticed by the members of the network, as it would be a huge shift in the chain. The members of the network would then create a split, forming a new chain that has not been impacted by the problem. This action would lead to the devaluation of the hacked token, rendering the attack totally useless since the perpetrator holds an asset that has no worth. The same outcome would happen if an individual with malicious intent attempted to attack the alternative version of Bitcoin. This structure is put in place so that it is more profitable to participate in the network than to attempt to attack it.
How Does Security Vary By Type of Blockchain
The participants and those with access to the data in blockchain applications can differ. Networks are typically categorized as either public or private, indicating who is allowed to join, and whether access to the system needs authorization or is open to all.
Public Blockchain
Public blockchain generally permits anyone to join. A public blockchain makes use of computers connected to the internet in order to confirm transactions and agree on shared data. An illustration of this would be Bitcoin, which is the foremost example of a public blockchain, and relies on bitcoin mining to reach consensus. Machines connected to the bitcoin system, known as “miners”, try to come up with a legitimate proof of work for a block in order to check the accuracy of the transactions contained in it.
Private Blockchain
On the contrary, Private blockchains verify eligibility to be involved and grant permission to specific parties by means of identification and entryway privileges. As a rule, they only grant access to certified individuals or entities. Only personnel with certain permissions and permissions can maintain the ledger of transactions. This network class demands more identity and access controls.
So, in other words:
Open blockchains which are accessible to anyone can be used to confirm trades. (Example: Bitcoin)
Private blockchains are confined to enterprise networks, and they have restricted capabilities. A single entity handles membership. (Example: Ripple (XRP) and Hyperledger).
Cyberattacks and Fraud on Blockchain
The following are the four main ways bad actors can harm blockchains.
Phishing Attacks
Attempting to obtain a user’s login information by deceitful means is what is known as phishing. Cybercriminals craft emails that mimic official correspondences and send them to wallet key holders in an effort to gain access. The emails attempt to deceive the user into providing the private key or login details to their cryptocurrency exchange account.
Routing Attacks
Routing attacks target the blockchain’s network infrastructure. Blockchains depend on real-time, extensive data transfers. If a hacker is able to divide the network into various disconnected portions, this makes certain attacks simpler to implement.
Sybil Attacks
In a Sybil attack, attackers create numerous bogus profiles to gain an advantage over the system. This will not be able to compromise blockchain consensus, but it can facilitate other types of assaults.
51% Attack
In a 51% attack, it’s all about gaining control. If a miner, or group of miners, are able to accumulate enough resources, they would be able to control more than half of a blockchain network’s mining power. Having control of more than half of the resources signifies having authority over the ledger, and the potential to manipulate it.
Therefore, in the blockchain universe, it is essential to implement safeguards to guarantee the security of both the blockchain structure and its environment.
Preventive Controls
Here are the measures which should be taken when designing blockchain applications- using protection at the data, application, and composition levels.
Data Protection
Blockchain made use of cryptographic parts like hash functions to make sure data accuracy and digital signatures to confirm transactions. Blockchain does not provide any form of data protection or privacy, although it can help ensure the accuracy and validity of data through configuration.
Digital signatures employ Public Key Infrastructure (PKI) to guard information that is saved on the blockchain, using encryption techniques. Other cryptographic techniques can be employed to reduce or remove dependencies on single nodes, such as requiring multiple nodes to collectively decrypt using shared keys or to sign critical data using multi-signature methods. In the end, data can be better protected by employing data reduction, for example retaining personal info securely not in the blockchain and just allowing non-vital data to be within the blockchain.
Application Protection
One of the main issues in safeguarding blockchain-based applications is getting security engineers to comprehend blockchain technology and its features, as well as how these features affect the total security of the applications that are being built on it.
Blockchain-driven concepts, like smart contracts, may involve complicated programming. The need for secure implementation plans and regulations to guarantee the usage of quality-tested software libraries and connections, regular code checks, and updates is heightened due to the fact that smart contracts are totally automated.
A more thorough analysis of the code could have prevented the design fault in the smart contract that led to the DAO Hack of 2016. Smart contracts also accept data from beyond the blockchain, such as foreign exchange rates. Therefore, it is necessary to carry out checks on the quality of input data and to verify the accuracy of the data in order to preserve the functionality and reliability of the system.
Infrastructure Protection
Blockchain technology utilizes existing components, therefore, the same kinds of cyber threats one would typically face with regular systems, such as viruses, hacking, etc., still exist for blockchain applications. Hence, all nodes must be subjected to routine security steps such as checking for weak spots and regularly updating software.
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